Share pricing -dcf method

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Querist : Anonymous

Querist : Anonymous (Querist)

28 February 2012 Dear friends

A private ltd company promoted by Foreign Nationals and is yet to commence its operation.
Other than Incorporation no other work has been carried out except receipt of inward remittance.
Whether DCF has to be adopted for issuing shares at face value for the subscribers to the memorandum.
Whether valuation certificate must contain DCF workings in this case.

Thanks

Guest

Guest (Expert)

28 February 2012 The initial issue of shares shall be done at face value.

Also if shares are issued at face value then there is no need to have DCF workings.

It is assumed that the foriegn nationals are the only investors and there is no premium charged to them for indigenous expertise.

DCF is adopted when any company with business in existence issues shares and its current book value does not reflect the fair value

Ajay Mishra

Ajay Mishra (Expert)
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28 February 2012 Hi

DCF method will be applicable whether the company is newly incorporated. A CA certificate is required to be attached with Form-FC-GPR which specify how the issue price is derives, if the company shares is non quoted.

Regards

CA. CS. Paras Shah

CA. CS. Paras Shah (Expert)
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28 February 2012 Irrespective of company have not commence its operation or a already established Company..You need to derive at company's Valuation by DCF Method in case of Foreign Capital Infusion. In Your scenario 5 yrs projections to be made which will have rational assumption by the Management and deriving at Discounting rate based on capital structure and industry per se...

Querist : Anonymous

Querist : Anonymous (Querist)

28 February 2012 Dear Friends
I do agree that DCF has to adopted for any foreign capital infusion.

However in this case foreign infusion of capital is only towards the shares mentioned in MOA agreed by the subscribers to MOA at the time of Incorporation of the Company.

In case of allotment of shares to the Subscribers to MOA as per the moa on incorporation can be only at par. There is no question of any valuation , or premium or discount in the above case.

Hence for the above case, whether DCF valuation is still required.
There is no further issue of shres other than the shares mentioned against their name in MOA .

Thanks

CA. CS. Paras Shah

CA. CS. Paras Shah (Expert)
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28 February 2012 what you mean is the Foreign Nationals are subscribers to memorandum and their names are mention in MOA & AOA? Then no need for DCF Valuation>....

Guys,
Correct me if i am wrong

Ajay Mishra

Ajay Mishra (Expert)
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28 February 2012 Hi

Agree with Mr. Shah, in case of subscriber to MOA their is no need to DCF valuations.

Regards

Querist : Anonymous

Querist : Anonymous (Querist)

28 February 2012 Dear friends
Thank you for clarifications

Guest

Guest (Expert)

01 March 2012 HI

Assume, i replied correctly

Also is this case the company is promoted by foreign nationals and they are the subscriber to MoA nd AoA.
May be the purpose is to get benefits of DTAA, SEZ's etc..
In future if any new investor comes in then DCF method may be worked out.